November 2009: Economic Sentiment Indicator continues to rise though consumers more cautious

In November, the Economic Sentiment Indicator (ESI) rose to 87.9 (+1.9 points) in the EU and to 88.8 (+2.7) in the euro area. The indicator has improved in both areas for eight consecutive months since its trough in March 2009, though it still remains significantly below the long-term average.

Economic sentiment indicator (s.a.)

EU: November 87.9

Euro area: November 88.8

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The majority of Member States reported a general improvement in sentiment. The indicator rose most sharply in the Netherlands (+6.3), while the improvements were more modest in Poland (+2.9), Italy (+2.5), France (+2.2), Germany (+1.7) and Spain (+1.4). The UK, in contrast, witnessed a sizeable drop (-2.9).

Sentiment in industry, which increased by 1 point in the EU and by 2 points in the euro area, was the main contributor to the overall improvement. The positive results in Germany and France were enough to offset declines in the UK and Spain. While most managers reported small improvements in their order books (except in the UK and Spain), it was production expectations which had the largest positive effect overall. Assessment of the level of stocks was broadly stable in the large countries, but it signalled more concerns about the level being above the desirable in the UK.

Confidence among consumers remained unchanged in the EU and improved by just one point in the euro area. This was influenced by a drop in German consumer confidence related to more widespread unemployment fears. Services increased by 2 points in the EU and by 3 points in the euro area. Positive signals emerged also in retail, which increased by 6 points in the EU and by 4 points in the euro area. Construction improved by 2 points in the EU and by 3 points in the euro area.

Confidence in financial services – which is not included in the ESI – declined in both regions. This was mainly due to disappointing demand over the past 3 months and bleaker demand expectations for the next 3 months.

According to the six-monthly industrial investment survey, which was carried out in October and November of 2009, managers in most Member States expect to reduce their investment volumes by 5% in the EU and 6% in the euro area in 2010 as compared to investment in 2009.

Industrial confidence indicator (s.a.)

EU: November -19

Euro area: November -19

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Service confidence indicator(s.a.)

EU: November -9

Euro area: November -4

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Consumer confidence indicator(s.a.)

EU: November -15

Euro area: November -17

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Retail trade confidence indicator(s.a.)

EU: November -6

Euro area: November -11

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Construction confidence indicator(s.a.)

EU: November -32

Euro area: November -26

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Financial services confidence indicator(n.s.a.)

EU: November 17

Euro area: November 15

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The next Business and Consumer Survey is due to be published on7 January 2010.